Q3 2021 Del Taco Restaurants Inc Earnings Call
Hello, and thank you for standing by welcome to the fiscal third quarter 2021 conference call and webcast for del Taco restaurants, Inc. I would now like to turn the call over to Mr. Raphael gross managing director at ICR to begin.
Thank you good afternoon and welcome on today's call are John Captisol, Our President and Chief Executive Officer, and Steve brake Chief Financial Officer. After we deliver our prepared remarks, we will open the lines for your questions, but first let.
Let me remind everyone that part of our discussion today will include forward looking statements. These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them. We do not undertake to update. These forward looking statements at a later date and refer you today to today's earnings press release, and our SEC filings for.
A more detailed discussion of the risks that could impact del tacos future operating results and financial condition Todays earnings press release also includes non-GAAP financial measures such as adjusted net income adjusted EBITDA and restaurant contribution along with reconciliations of these non-GAAP measures to the.
Nearest GAAP measures, however, non-GAAP financial measures should not be considered as alternatives to GAAP measures such as net income or loss operating income or loss net cash flows provided by operating activities or any other GAAP measure of liquidity or financial performance. Let me now turn the call over to.
John Capa, Sala, President and Chief Executive Officer.
Thank you Raphael and Hello, everyone. We appreciate you all joining us for today's call.
I'm very proud of our teams who continue to drive strong restaurant level execution in this difficult operating environment.
Our third quarter performance was in line with our expectations, which I would characterize as a good outcome, particularly in light of well known cost pressures across the restaurant industry.
On the topline we drove positive comparable restaurant sales across company operated and franchise restaurants compared to last year and compared to 2019 as we lap strong performance driven by our very successful launch of crispy chicken and despite the emergence of the Delta variant along with well documented and staffing challenges in our category.
At the same time, the inflationary headwinds impacting our industry were managed through menu pricing totaling approximately 5% paired with operational excellence and strong guest satisfaction scores across our drive through takeout and delivery channels.
In addition, as you may have read in numerous recent press releases, we have been very active signing four additional new franchise development agreements from coast to coast since July bringing our year to date total to seven new development agreements for 53 future commitments. These new development agreements expand our pipeline and further.
Port our ability to deliver 5% system wide new unit growth led by franchising beginning in 2023.
First I will briefly review our third quarter highlights before discussing the specifics on these new franchise development agreements.
During Q3 system wide comparable restaurant sales grew one 8% over the prior year, consisting of a 2% increase at franchise restaurants, and a one 6% increase at company operated restaurants.
During Q3 on a same store basis compared to 2019 company sales grew at a low single digit rate while franchise restaurants grew at a high single digit rate.
Geographically on a same store basis versus 2019 are primarily franchise non California restaurants grew approximately 10%, while California grew at approximately four 6%.
Restaurant contribution margin decreased by 150 basis points to 16, 5%, which primarily related to normalized advertising expense, a 4% of restaurant sales versus 3% last year.
In terms of profit adjusted EBITDA decreased to $15.0 million from $18.0 million. This.
This reduction was primarily due to the dollar impact of the normalized advertising.
Through our quarterly dividend and share repurchases, we returned an aggregate $14.0 million of capital to shareholders and also reduced our outstanding revolver to 106 million from $110 million.
Finally during Q3, we opened one company and three franchise restaurants and closed one company and one franchise restaurant and with 603 system wide restaurants.
Now, let's discuss restaurant development and specifically, how our new agreements with experienced restaurant operators provide momentum for our franchise led growth.
So far this year franchisees opened eight new restaurants, and the company has opened three company operated restaurants.
Our fourth and final 2021 company opening will be our first new fresh flex prototype and our new Orlando seed market and we expect one additional franchise opening.
Following three development agreements for 30 units announced prior to our Q2 call. Since July we have signed an additional four new development agreements for another 23 units.
These newest agreements cover future restaurants in four states from coast to coast, including the East coast, or Central, Florida, and Raleigh, Durham, North Carolina, as well as Fresno, California, and non traditional casino locations in Las Vegas.
These signings demonstrate our growth potential not only in the southeast, which we know has significant room to grow the brand, but also in California and in Las Vegas, where even with our current penetration. We believe there are still strong infill growth opportunities.
Importantly, our steady stream of new franchise development agreements has been aided by very strong interest in <unk> drive through development and ultimately made possible by a highly desirable del Taco traits, including our unique <unk> plus positioning ubiquitous menu that drives broad appeal strong track record of eight consecutive.
Here's a franchise comparable restaurant sales growth across 15 states and attractive new fresh flex prototype, which expands real estate opportunities to help lower net investment in modernizes the guest experience.
On a related note, we recently announced a new delivery only license agreement with reef.
A leader in the growing ghost kitchen space, we expect to open our first reef outlet in the dense urban mid city area of Los Angeles later, this month, which is the first of several planned outlets.
We are excited about this new delivery only partnership to help expand access to the brand where there is strong delivery demand, particularly in high density urban areas.
As a reminder, we expect a modest step up in system wide restaurants in 2022 compared to 2021 as existing franchisees begin to leverage fresh flex. However.
However, we believe our growing franchise development pipeline, including seven new agreements for 53 del Taco restaurants signed this year puts us in a strong position to deliver on our stated goal of system wide new unit growth of 5% beginning in 2023.
Regarding our test remodel program. We are currently integrating our fresh flex prototype into a remodel design and remain on track to complete up to 20 company operated Remodels. This year, including 10 extensive remodels of older facilities and 10 remodels in more modern facilities with primarily cosmetic.
<unk> at a lower investment level.
We are excited about the transformative impact. These remodels are having on the restaurant and expect to continue to continue to invest in this important brand and <unk> driving initiative as we move into 2022.
Turning to sales and marketing.
We continue to execute on our five sales acceleration drivers and those are value leadership menu innovation brand engagement digital transformation and ultimate convenience.
These pillars are anchored by our focus for better operations execution strategy designed to ensure that we provide guests and employees outstanding brand experiences.
Let me start with operations.
The entire industry is feeling the impact of labor staffing challenges and we're no exception for certain restaurants with labor availability challenges, we selectively increased wages and in some cases temporarily closed dining rooms or limit our late night and early morning hours of operation.
The need to reduce operating hours increased throughout Q3 and impacted the company operated comparable restaurant sales by slightly under 1% during fiscal Q3, we.
We believe this impact has peaked at approximately 1% thus far during fiscal Q4 based on recent improvements from our efforts to combat the labor challenges.
Specifically, we are executing our holistic staffing strategy focused on both recruitment and retention.
On the retention side, we are showing appreciation for our teams through things like daily pay free meals and doubling our referral bonuses along with special events like employee appreciation month. We've also enhanced our talent acquisition through new digital recruiting efforts to increase our presence on job boards and simplify the application process.
<unk> to reduce friction for applicants.
<unk> our actions have begun to translate into increased applicant flow that is allowing hotspot restaurants to return to more normalized operations.
As we add staff to these locations. We are also investing in additional training to set the new team members up for success.
Turning to sales and marketing in August we leveraged our menu innovation, introducing another exciting platform stuffed quesadilla tacos, which takes our fan favorite Quesadilla and adds creamy queso Blanco folded into the shape of a taco shell and stuffed with grilled chicken carneous order stake or a crispy chicken as well.
Our fresh guacamole as an add on.
These tacos represent a trade up from our current tacos and have been met with strong consumer demand mixing at over 6% of sales, thus far which has helped us maintain our positive sales momentum as we lapped a very successful crispy chicken launch a year ago.
Next month, we welcomed the seasonal return of our authentic tamales menu, which we consider a perfect holiday comfort food or tamales are made with season shredded pork and a fire roasted salsa surrounded by a layer of soft stone ground corn masa and wrapped in an authentic corn husk.
We will also offer a tamale Fiesta pack with 12 tamales defeated the whole family with a simple trip through our convenient drive throughs or delivery channels.
On the day part front.
Delivery remains a key driver of sales growth representing over 7% of sales during the third quarter delivery is particularly well suited to capitalize on guest demand for convenience and value during our late night hours of operation when delivery over indexes and is helping to drive outsized one and two year growth in our late night day parts.
<unk>.
Turning now to digital transformation last month, we successfully launched our new holistic CRM platform and introduced our new loyalty App called <unk> rewards.
<unk> rewards is a point based loyalty program featuring four tiers named Queso score show Inferno and epic.
That unlock exciting offers rewards and experiences which increase along with the usage of the app.
Dahlia rewards also enables us to unlock our customer data to drive personalized and value experience valued valued experiences by delivering unique messages and offers in a way that members are most apt to respond to.
We are very excited by the launch of this loyalty program and look forward to sharing more on its impact to the business on future calls.
Finally, reflecting our commitment to deliver shareholder returns we paid our third quarterly cash dividend of <unk> <unk> per share in late August and today announced our fourth quarterly dividend of <unk> <unk> per share, which will be paid on November 24th.
We also repurchased approximately $8.0 million of common stock during the quarter as part of our buyback program.
Looking ahead, although the current environment continues to present staffing challenges and inflationary pressure are relevant and <unk> plus positioning use of innovation and ability to deliver value across our barbell menu strategy provides us with significant pricing power that we will utilize to manage inflation as we exit 2021.
And enter 2022 this focus along with our strong foundation, which now includes our new Delhi, a rewards program and an expanding group of franchisees eager to invest in our brand for the long term.
I have set us up for continued growth and expansion now I will turn the call over to Steve to review, our Q3 financial results and outlook.
Thanks, John.
For the third quarter total revenue increased two 9% to $127.0 million from $128 million in the year ago period Company restaurant sales increased two 2% to $112 million from $114.0 million in the year ago period, which was primarily driven by positive comparable restaurant.
Sales and to a lesser extent new company operated restaurants franchise revenue increased eight 1% year over year to $11.0 million from $7.0 million last year.
Growth was primarily driven by the increase in franchise comparable restaurant sales coupled with additional franchise operated restaurants compared to last year as John said earlier system wide comparable restaurant sales increased one 8% consisting of a one 6% increase at company operated restaurants and a 2.0.
<unk> increase at franchise restaurants, turning to expenses food and paper cost as a percentage of company restaurant sales decreased approximately 30 basis points year over year to 26, 2% from 26, 5%. This was primarily driven by menu price increase of approximately 5% exceeded food inflation.
<unk> of just over 4%.
As expected inflationary pressure materialize during the second half of 2021, and our projected Q4 food inflation is approximately 5%, resulting in full year inflation of approximately 2% to.
To help manage this inflation, we accelerated the timing and magnitude of our fall price increase and now expect menu price of five 5% in the fourth quarter.
Looking ahead, we believe our <unk> plus positioning and the attractive price points, we offer across our barbell menu strategy drives a compelling value proposition and provides us with significant pricing power that we plan to utilize in the new year to help manage food inflation that will likely extend into the first half of 2022.
Labor and related expenses as a percentage of company restaurant sales increased 80 basis points to 33, 2% from 32, 4% driven primarily by minimum wage increases in California, and Nevada, as well as wage rate pressure from restaurants with labor availability challenges, where we selectively incur.
<unk> wages.
These impacts were partially offset by the impact from a positive comparable restaurant sales, including elevated menu pricing effective management of variable labor and a reduction in workers comp expense based on favorable underlying trends.
Occupancy and other operating expenses as a percentage of company restaurant sales increased by approximately 100 basis points to 24, 1% from 23, 1% last year. This increase was primarily due to higher advertising expense, which normalized at 4% of restaurant sales compared to 3%.
In the prior year quarter and higher utility expense.
Restaurant contribution decreased six 3% to $23.0 million compared to $26.0 million in the prior year, while restaurant contribution margin decreased approximately 150 basis points to 16, 5% from 18.0% primarily due to the aforementioned higher adverse.
And compared to last year.
General and administrative expenses were $13.0 million up from $18.0 million last year and as a percentage of total revenue held steady at 9.0% compared to last year the.
The increase was primarily driven by increased noncash stock based compensation travel expense and general inflationary trends, partially offset by lower management incentive compensation expense.
Adjusted EBITDA decreased 8.0% to $15.0 million compared to $18.0 million last year and decreased as a percentage of total revenues to 11, 3% from 12, 7% last year.
Depreciation and amortization was 6.0 million down from $7.0 million last year due to the impact of fully depreciated assets and decreased 20 basis points to four 8% as a percent of total revenue.
Interest expense was 0.7 million compared to <unk> 9 million last year. The decrease was due to a lower average outstanding revolver balance and lower interest rate compared to 2020.
During the third fiscal quarter, our outstanding revolving credit facility borrowing was reduced from $110 million to $106 million and the remaining availability under the revolving credit facility was $136 million.
Along with this debt reduction we also repurchased 449324 shares of common stock at an average price of $96.0 per share during the third quarter for a total of $8.0 million and paid our third quarterly cash dividend totaling $6.0 million at the end of the fiscal third quarter.
<unk> only $16.0 million remained under our $75 million repurchase authorization net.
Net income was $11.0 million or <unk> 10 per diluted share compared to $13.0 million or <unk> 15 per diluted share last year. We also reported adjusted net income, which excludes items identified in our earnings release and the financial tables.
Adjusted net income was $6.0 million or approximately <unk> 11 per diluted share compared to 6.0 million or <unk> 16 per diluted share of last year.
In today's earnings press release, we formally announced our fourth quarterly dividend of <unk> <unk> per share of common stock that will be paid on November 24, 2021 to shareholders of record at the close of business on November three 2021.
Finally through the first five weeks of our 16 week fiscal Q4, our company operated comparable restaurant sales were up approximately 3% and franchise comparable restaurant sales are up over 4%. Despite the impact from reduced operating hours that John referenced.
Please refer to today's earnings press release for our fiscal 2021 guidelines that concludes our formal remarks as always thank you for your interest in del Taco and we are happy to answer any questions.
And at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.
Information tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
And our first question is from Alex Slagle with Jefferies.
Please proceed with your question.
Alright, thank you.
On a same store sales just wanted to walk through some of the drivers.
Trying to think through some of the biggest tailwind and headwinds.
It sounds like the trends improved.
Good here.
Year to date.
Maybe first just on the intro of the CRM platform and loyalty program.
How we should think about that in terms of directly impacting the comps in the early stages if at all.
Should we think about that piece.
Yeah.
It's early Alex I mean, we're seeing some really good directional trends, but we're only four weeks and so as a reminder.
We launched on September nine.
And then we did the hard launch which was point of purchase materials at the restaurant starting to do some of the marketing on September 16th. So just a few weeks ago, and then really our second wave campaign, which was really a focus on marketing and acquisition and getting folks to transition.
Not only getting new members to get folks to transition from the old App to the new App kicked off here on October 4th with some tags on television and radio and promoting it through our direct mail and FSA drops and we've also got some digital media acquisition going so so it's early days, but what I would what I would say is that you know directionally.
It's what's happening is kind of what we wanted to have happened, which was you look at the motivation that occurs with both current and new members related to the point based system and that structure designed to motivate and reward behavior.
We've seen.
<unk> active users already in the first four weeks.
Perform at a similar level that we had with our old App and that's before we've even completed the migration right. You've still got guests that are moving into the new app from the old App.
The other kind of piece that we thought was.
Really telling and interesting was that nearly 40% of the new member of the.
Members coming into <unk> rewards are actually new members. So these are folks that were not any old out. So so again, just kind of speaks to the motivation around.
That out not just being an offer engine or there are some reasons to be involved with the brand and engage with the brand and that and certainly the angle to earn points and move up into the loyalty tiers.
A big part of that so we feel great about the first four weeks execution has been good and in a lot more marketing to come in regards to that App as we move through the back end here of Q4 and into into obviously 2022.
Okay.
Many members are you up to now.
So we have nearly 250000 members in the first in the first four weeks. So again, that's a combination of those new folks I referenced nearly 40% and then folks migrating over from the old app into and to the new App. So again just to underscore when you see the unique active users performing at a Sim.
Another level in the first four weeks.
In aggregate and totality of that on that 250000 number compared to the $6.0 million that we had in the old app that that's pretty impressive and I think it speaks to the frequency of usage, that's happening within that within the new loyalty program.
Okay.
And then.
Thinking about some of the other driver is staffing obviously that you talked about that being.
100 basis point sort of impacting.
I guess working that down and then just in terms of menu innovation and promotional lapse.
Kind of what would you call out is the biggest driver.
Driver for us to think about in terms of changing the trajectory in.
Accelerating the comps.
Yeah, I think it's important to remember that.
Q3 was positive going over positive for both the company and franchise same store sales trends in Q4, thus far as we noted is is also a positive going over positive for company and franchise.
It's important to remember that we were able to achieve same store sales growth in Q3, and Q4 of 2020, despite the pandemic and we just we just happened to rollover in Q3, one of the more successful product launches in the history of the company, which was in a crispy chicken Taco.
We are in a crispy chicken menu in 2020 I think overall.
Well, what I'd say on the on this front as the product launches with stuffed quesadilla tacos and double cheeseburger topped with along with Telia rewards, which will continue to build momentum are driving improved year on year same store sales trends as we look at the first five weeks of Q4 compared to Q3, and that's really despite those operating.
Operating in a more challenging environment year on year.
Due to some of those staffing challenges that we that we referenced in those hotspot stores. So so overall, we expect to finish 2021 with six consecutive quarters of same store sales growth in both the company and franchise and that's basically going back to obviously the last negative quarter was Q2 of 2020, which was the first.
The pandemic, so I think overall.
We feel good about the trend and the programs that we've launched recently and we think that that's where they're.
Going a long way in helping US continue to drive same store sales growth.
And just then last question I just wanted to.
See on delivery you are seeing any changes in demand or anything that type of thing.
The potential.
So the benefits of the stimulus and extended unemployment benefits to be seen.
Hey, Matt.
We continue to see delivery for the system, both company and franchise continuing to grow modestly both company and franchise where were north of 7% during fiscal Q3.
Do you view as a good sign, especially since we did implement another slight uptick to our menu price premium for delivery on the company side.
Any restaurants and about 22, 5% franchisees also in that low to mid 20% area. So we feel good about the model and the trend.
Great. Thank you.
And our next question is from Nick <unk> with Wedbush Securities. Please proceed with your question.
Thank you.
Was the overall average check in the quarter Steve.
It was.
In the mid high <unk>.
Got it.
And five 5% pricing in Q4.
Assuming it kind of stays in that 5% range like in first half in the first half of 'twenty two.
You guys kind of gave us 5% food cost inflation in Q4.
Does that imply like we should see Cogs as a percentage of sales come down in Q4 versus Q4 of last year or is there some mix.
<unk> that we should think about.
Well the commentary looking at both food inflation and menu price both being in that five plus percent area, which would imply flattish for Q4 on a year over year basis, which is I think directionally correct.
You know your waste and efficiencies can somewhat play into the food and wine as well not to mentioned product mix, but.
In general that would be a flattish if some implication for Q4 year over year.
And I guess the same question on labor.
<unk> Q3 was down about 5%, assuming 6% inflation.
We saw about 80 bps of labor deleverage.
Just given the level of pricing perhaps.
I would've thought it would've been a little less.
Is there like overtime pay there Ben but just kind of maybe go through the puts and takes on labor that we should think about in terms of how to think about the.
Overall, you know maybe hourly growth versus just inflation, how should we how should we think about that as we kind of think about how to model the labor line.
Yeah on labor.
As typical with our California heavy in Nevada heavy footprint.
The driver of inflation is California, and Nevada minimum wages.
It was working against us.
See the operational efficiency has been very good at the restaurant level. So that's been a positive operators are executing that very well.
But again back to the minimum wage that's the main driver and then you know Jon touched on it and certainly it's more unlimited basis, but there are kind of hotspot restaurants, if you will which armen minority, but those are situations, where we are paying a higher prevailing wage as appropriate and then in addition.
Some of the labor availability challenges that John touched upon that of course does play into not just some curtailment of operating hours, but also indeed, you hit the nail on the head and increased uptick in over time. So all of that serves to boost up average effective wage which includes the impact of overtime.
Given your average wage will continue to tick up during the course of the year.
This year that additional rate of growth has been higher intra year.
Than we've seen before.
That said on a long term basis.
Average wage.
With the California footprints, we are on a path towards $15 an hour minimum wage culminates in California, starting January one just a few months from now and in fact at $15 level. Then maintained through 2023. So it's certainly possible that some of this in your uptick in wage we're experiencing maybe more of a <unk>.
<unk> issue when you think about the long term that said it was pressuring us a bit in Q3 played into that 80 bps of deleverage that you saw and given the trend that will continue into Q4, but we'll again expect deleverage on that line.
Again with the low single digit call it seems sort of sales trajectory.
That's what leads to the deleverage overall.
Understood and then just last question.
You kind of commented that.
More recently, you've seen some of the labor pressure.
Come down.
First is that a correct interpretation and second understanding that you don't really have a crystal ball.
But I guess, what's your internal.
Estimate or our expectation or how youre, how youre strategizing for.
For for what what when the timeframe for when when that normalizes by the end of Q4 or is it more like.
In the middle of 'twenty two.
In terms of the staffing issue.
So.
It remains very fluid, it's hard to predict exactly what's going to happen, but I'll say, we've got a very holistic strategy that we've talked about on a couple of calls now in regards to how we're thinking about both acquiring quality talent as well as keeping quality talent and making sure that we're training and developing them and you know overall.
I think our operators and our franchisees are just doing an outstanding job.
Leading late leading in this environment with our people first focus and navigating a kind of a very challenging time, you know that said you know the hotspot restaurants, where we've reduced operating hours.
By by an hour or more or so you know that that roughly that roughly represented somewhere in the kind of mid to high teens as a percent of restaurants.
Kind of as you look at it week to week it changes a little bit week to week, depending on the situation with the restaurants, we are managing it our operators and our franchisees are managing a daily and weekly.
The commentary around it, peaking so far in Q Q4 at about 1% that's due to a really nice improvement in applicant flow coming into the system in the last few weeks and.
That is related to.
You know a digital recruitment campaign that we are investing into that we have the ability to kind of really target on a zip code basis, and and put extra dollars into stores that need more help and take some dollars away from stores that don't need quite as much help and that's actually improve the applicant pool for us by Forex over over the last few weeks so that.
Quality applicants coming into the system that step one for these hotspot restaurants, and then getting those folks trained properly and develop properly to create great guest experiences that step two but but certainly we've seen some of these some of these hotspot restaurants start to return back to more normalized behavior normalized operating hours I should say in recent.
Weeks.
Understood. Thank you.
Okay.
And our next question is from Todd Brooks with CL King <unk> Associates. Please proceed with your question.
Hey, good afternoon guys.
Good job navigating a tough environment here.
Yeah.
Wanted to lead off with.
Just kind of the same store sales progression.
The comparison, obviously crispy chicken a massive platform for you guys.
Good success with new products.
During Q3, allowing you to still comp positively even with the headwinds from labor how does the kind of comparison.
Look across the back half of.
The fourth quarter relative to what you've talked about.
Comparing against in that.
That three 3%, 4% range so far in the quarter does it ease at all as you move farther into the crispy chicken launch.
For the system Todd both company and franchise, we have a 16 week fourth quarter. The second the later eight weeks did performed better year ago. Then the first eight weeks. So the compare if you will get a little bit more difficult as we round out the back half of the quarter.
<unk>.
At the same was there at.
At the same time.
The burn off from crispy chicken starting to occur we were maintaining higher sales mix, but that initial excitement around crispy chicken really was burning off in in September and now obviously, having some of these new platforms that we've launched.
And hope you continue to see gaining gaining momentum along with our tamales L. T O that happens kind of in November we think we're in a pretty good position.
Obviously have a positive positive same store sales on the company and the franchise business in Q4, and and put up a nice result.
Great and you do have the benefit of call you out now, which you did not have last year as a driver so.
Currently.
Okay great.
Secondly, can you give us some details behind the reef partnership how does that work is that a royalty arrangement and I guess, if you look at.
The markets that you're operating I know youre about to open. The first later this month, but what's the potential of kind of densely urban markets that you could see if this works dropping.
<unk> Ghost Kitchen, then too.
Yes, we're excited about it the first outlet will open later this month very dense urban or dense urban area of L. A.
The purpose here is expand access to the brand.
Particularly in dense areas, where there's a lot of guests and occasions that were just not servicing today. So we're excited about that as we mentioned there are several more planned.
You know overall to your question. It really is very akin to franchising. Its a license deal very similar to a franchise arrangements. Although does feature a reduced marketing contribution which is appropriate based on the nature of this delivery only channels. So really focus right now is having a good successful launch here.
Moving forward with the additional planned openings down the road and you know really learned from it and then decided from there you know in partnership with read what the future looks like so we're excited a lot more to come including performance out of the first of several outlets.
Okay, Great and then final one for me.
Real acceleration in your franchising activity here in the third quarter.
With larger scale partners, too, which are which is great to see.
Yes, two questions on this front, but how does the pipeline look behind it are there people that are conditioning. There their decision to go on seeing kind of the first fresh flex come out of the ground in Florida This quarter and secondly, with the types of partners that you are signing with.
My sense is the bandwidth is there there's a signed deal if it works could grow pretty dramatically could you talk about <unk>.
Maybe.
Other brand nameplates that these partners are running and.
A 10 year deal and the potential for it to grow into something if it really works for them.
<unk>.
Yeah.
Yes, sure Todd we so first off from a pipeline perspective, we've been building, obviously building pipeline with a great group of existing franchisees for some time now and I think our existing group.
That really is the foundation of our pipeline has done a nice job in is really excited about fresh flax and continues to build you know.
Opportunities and especially now as you look at having a with our menu of venue strategy more and more assets to grow with than we had before it's not the old kind of cookie cutter model anymore and Oliver we've expanded the asset group to be drive through only which is a smaller footprint. Perhaps gives you the opportunity to access trade areas you couldnt have access before.
For all the way up to more of a standard prototype.
Prototype with a dining room, so that existing group is has been and will continue to build pipeline and be a big part of our our growth our growth story and then what you referenced as the seven new deals for 53 units that we've signed this year, obviously those will start to come.
To fruition here over the next over the next 18 to 24 months. So this is initial stores are opening in and to your point we are.
We're absolutely taking a quality over quantity type of an approach with these groups. We certainly see some operators that we've signed that have some some big brand name plates to airplane and have capability and current store counts and.
The multi dozen range and more than.
We know that with with success begets.
The biggest excitement and more success and Thats, where our intent on delivering and supporting our partners to do so to your point, there's there's definitely some upside, but we need to execute we need to deliver the brand and we need to give our new partners. The support for them to be able to kind of get to that next level of growth. If you will.
Okay, great. Thanks, John.
Got it.
And again as a reminder, if anyone has any questions you May press star one on your telephone keypad billings will ensure your spot in the question and answer queue.
And our next question is from Nicole Miller with Piper Sandler. Please proceed with your question.
Thank you so much and good afternoon, just a couple of quick ones.
The fourth quarter price five 5% did that start day, one of <unk> or is that coming now.
It'll evolve slightly throughout the quarter, but throughout the quarter, we will be maintaining somewhere between five and six based on the timing of what were rolling over.
So essentially day, one were in the five plus area.
Okay. I was just trying to true it up to the commentary of the quarter to date comps I appreciate that to see how much my prices on the com against.
Difficult compares given the earlier question.
And then second on comp and.
This is probably maybe just nuanced, but company owned improvement.
Could reflect easing compares that franchise comp gets more challenging and theyre doing much.
Better we know price could be a factor or is there anything else you would point to any other.
All day part regional trend that we should be aware of.
Yes, we still have a very fairly pronounced theme of geographic differences. So the company is heavily California, Southern California, specifically in Las Vegas, where as you know franchisees are operating across 15 states footprint. So we continue to see on a one into your base.
Real really outsized very strong performance, particularly outside of California, which you know is largely in favor of our franchise community, where we share markets with franchisees in southern California performance as you know much more aligned with much more modest franchise outperformance, so really that gee.
Graphic theme continues to be fairly pronounced in favor of franchise.
Okay. Thanks, and then just the last one I mean I was just kind of.
Listening to the presentation and thinking at a very high level. This is really about swapping in and Refranchising some stores for a high flow through EBITDA.
EBITDA stream right and so I know there was mention of like 2% revenue growth, but I'm looking at what was like 5%.
Total system sales growth and up almost or more than 10% versus 2019. So.
Have I characterize that properly and the system is probably growing faster than just looking at that total revenue line right.
Yes, again, a metric like our system wide sales, which captured.
Or wall sales of 600 units system, certainly would reflect the more robust growth youre, describing whereas on the top of the P&L the revenue line.
So heavily influenced by company restaurant sales that are certainly comping positive and growing but at a lower rate compared to franchise, whereas franchise revenue to show that robust growth that you alluded to.
Yeah, and you sloughed off some stores right and that's the plan so again in favor of a recurring royalty stream. So.
I guess I just wanted to make sure like where are you now making that comparison as well so.
Just ticking and tying and I think that's it for me. Thank you for taking my questions I appreciate it.
Youre welcome Thanks, Nicole.
Yeah.
And we have reached the end of the question and answer session and I'll now turn the call back over to management for closing remarks.
Okay. Thank you operator, and we certainly appreciate everyone taking the time today with us and we thank you for your interest in del Taco and it's exciting to accelerate growth and we feel great about our prospects on that front. So we look forward to sharing our progress on future calls have a great day.
Thank you for joining US today you may disconnect your lines at this time.
Good day.
Yes.
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